Editing IPCC:AR6/WGIII/Chapter-5 (section)

===== The circular economy =====

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While the demand for energy and materials will increase until 2060 following the traditional linear model of production and consumption, resulting in serious environmental consequences ( [[#OECD--2019b|OECD 2019b]] ), the circular economy (CE) provides strategies for reducing societal needs for energy and primary materials to deliver the same level of service with lower environmental impacts. The CE framework embodies multiple schools of thought with roots in a number of related concepts ( [[#Blomsma--2017|Blomsma and Brennan 2017]] ; [[#Murray--2017|Murray et al. 2017]] ), including cradle to cradle ( [[#McDonough--2002|McDonough and Braungart 2002]] ), performance economy ( [[#Stahel--2016|Stahel 2016]] ), biomimicry ( [[#Benyus--1997|Benyus 1997]] ), green economy ( [[#Loiseau--2016|Loiseau et al. 2016]] ) and industrial ecology ( [[#Saavedra--2018|Saavedra et al. 2018]] ). As a result, there are also many definitions of CE: a systematic literature review identified 114 different definitions ( [[#Kirchherr--2017|Kirchherr et al. 2017]] ). One of the most comprehensive models is suggested by the Netherlands Environmental Assessment Agency ( [[#Potting--2018|Potting et al. 2018]] ), which defines ten strategies for circularity: Refuse (R0), Rethink (R1), Reduce (R2), Reuse (R3), Repair (R4), Refurbish (R5), Remanufacture (R6), Repurpose (R7), Recycle (R8), and Recover energy (R9). Overall, the definition of CE is contested, with varying boundary conditions chosen. As illustrated in Figure 5.11, the CE overlaps with both the sharing economy and digitalisation megatrends.

In line with the principles of SDG 12 (responsible consumption and production), the essence of building a CE is to retain as much value as possible from products and components when they reach the end of their useful life in a given application ( [[#Lewandowski--2016|Lewandowski 2016]] ; [[#Lieder--2016|Lieder and Rashid 2016]] ; [[#Stahel--2016|Stahel 2016]] ; [[#Linder--2017|Linder and Williander 2017]] ). This requires an integrated approach during the design phase that, for example, extends product usage and ensures recyclability after use (de Coninck et al. 2018). While traditional ‘Improve’ strategies tend to focus on direct energy and carbon efficiency, service-oriented strategies focus on reducing lifecycle emissions through harnessing the leverage effect ( [[#Creutzig--2018|Creutzig et al. 2018]] ). The development of closed-loop models in service-oriented businesses can increase resource and energy efficiency, reducing emissions and contributing to climate change mitigation goals at national, regional, and global levels ( [[#Johannsdottir--2014|Johannsdottir 2014]] ; [[#Korhonen--2018|Korhonen et al. 2018]] ). Key examples include remanufacturing of consumer products to extend lifespans while maintaining adequate service levels ( [[#Klausner--1998|Klausner et al. 1998]] ), reuse of building components to reduce demand for primary materials and construction processes ( [[#Shanks--2019|Shanks et al. 2019]] ), and improved recycling to reduce upstream resource pressures ( [[#IEA--2019b|IEA 2019b]] ; [[#IEA--2017b|IEA 2017b]] ).

Among the many schools of thought on the CE and climate change mitigation, two different trends can be distinguished from the literature to date. First, there are publications, many of them not peer-reviewed, that eulogise the perceived benefits of the CE, but in many cases stop short of providing a quantitative assessment. Promotion of CE from this perspective has been criticised as a greenwashing attempt by industry to avoid serious regulation ( [[#Isenhour--2019|Isenhour 2019]] ). Second, there are more methodologically rigorous publications, mostly originating in the industrial ecology field, but sometimes investigating only limited aspects of the CE ( [[#Bocken--2017|Bocken et al. 2017]] ; [[#Cullen--2017|Cullen 2017]] ; [[#Goldberg--2017|Goldberg 2017]] ). Conclusions on CE’s mitigation potential also differ, with diverging definitions of the CE. A systematic review identified 3,244 peer-reviewed articles addressing CE and climate change, but only 10% of those provide insights on how the CE can support mitigation, and most of them found only small potentials to reduce GHG emissions ( [[#Cantzler--2020|Cantzler et al. 2020]] ). Recycling is the CE category most investigated, while reuse and reduce strategies have seen comparatively less attention ( [[#Cantzler--2020|Cantzler et al. 2020]] ). However, mitigation potentials were also context- and material-specific, as illustrated by the ranges shown in Figure 5.13a.

There are three key concerns relating to the effectiveness of the CE concept. First, many proposals on the CE insufficiently reflect on thermodynamic constraints that limit the potential of recycling from both mass conservation and material quality perspectives or ignore the considerable amount of energy needed to reuse materials ( [[#Cullen--2017|Cullen 2017]] ). Second, demand for materials and resources will likely outpace efficiency gains in supply chains, becoming a key driver of GHG emissions and other environmental problems, rendering the CE alone an insufficient strategy to reduce emissions ( [[#Bengtsson--2018|Bengtsson et al. 2018]] ). In fact, the empirical literature points out that only 6.5% of all processed materials (4 Gt yr –1 ) globally originate from recycled sources ( [[#Haas--2015|Haas et al. 2015]] ). The low degree of circularity is explained by the high proportion of processed materials (44%) used to provide energy, thus not available for recycling; and the high rate of net additions to stocks of 17 Gt yr –1 . As long as long-lived material stocks (e.g., in buildings and infrastructure) continue to grow, strategies targeting end-of-pipe materials cannot keep pace with primary materials demand ( [[#Krausmann--2017|Krausmann et al. 2017]] ; [[#Haas--2020|Haas et al. 2020]] ). Instead, a significant reduction of societal stock growth, and decisive eco-design, are suggested to advance the CE ( [[#Haas--2015|Haas et al. 2015]] ). Third, cost-effectiveness underlying CE activities may concurrently also increase energy intensity and reduce labour intensity, causing systematically undesirable effects. To a large extent, the distribution of costs and beneﬁts of material and energy use depend on institutions in order to include demand-side solutions. Thus, institutional conditions have an essential role to play in setting rules differentiating profitable from nonprofitable activities in CE ( [[#Moreau--2017|Moreau et al. 2017]] ). Moreover, the prevalence of CE practices such as reuse, refurbishment, and recycling can differ substantially between developed and developing economies, leading to highly context-specific mitigation potentials and policy approaches ( [[#McDowall--2017|McDowall et al. 2017]] ).

One report estimates that the CE can contribute to more than 6 GtCO 2 emission reductions in 2030, including strategies such as material substitution in buildings ( [[#Blok--2016|Blok et al. 2016]] ). Reform of the tax system towards GHG emissions and the extraction of raw materials substituting taxes on labour is a key precondition to achieve such a potential. Otherwise, rebound effects tend to take back a high share of marginal CE efforts. A 50% reduction of GHG emissions in industrial processes, including the production of goods in steel, cement, plastic, paper, and aluminium, from 2010 until 2050, is impossible to attain only with reuse and radical product innovation strategies, but will need to also rely on the reduction of primary input ( [[#Allwood--2010|Allwood et al. 2010]] ).

CE strategies generally correspond to the ‘Avoid’ strategy for primary materials (Sections 5.1 and 5.3.2). CE strategies in industrial settings improve well-being mostly indirectly, via the reduction of environmental harm and climate impact. They can also save monetary resources of consumers by reducing the need for consumption. It may seem counterintuitive, but reducing consumers’ need to consume a particular product or service (e.g., reducing energy consumption) may increase consumption of another product or service (e.g., travel) associated with some type of energy use, or lead to greater consumption if additional secondary markets are created. Hence, carbon emissions could rise if the rebound effect is not considered ( [[#Chitnis--2013|Chitnis et al. 2013]] ; [[#Zink--2017|Zink and Geyer 2017]] ).

Looking at ‘Shift’ strategies (Sections 5.1 and 5.3.2), the role of individuals as consumers and users has received less attention than other aspects of the CE (e.g., technological interventions as ‘Improve’ strategies and waste minimisation as ‘Avoid’ strategies) within mainstream debates to date. One explanation is that CE has roots in the field of industrial ecology, which has historically emphasised materials systems more than the end user. By shifting this perspective from the supply side to the demand side in the CE, users are, for the most part, discussed as social entities that now must form new relations with businesses to meet their needs. That is, the demand-side approach largely replaces the concept of a consumer with that of a user, who must either accept or reject new business models for service provision, stimulated by the pushes and pulls of prices and performance ( [[#Hobson--2019|Hobson 2019]] ).

Relevant contributions to climate change mitigation at gigatonne scale by the CE will remain out of scope if decision-makers and industry fail to reduce primary inputs ( ''high confidence'' ). Systemic (consequential) analysis is required to avoid the risk that scaling effects negate efficiency gains; such analysis is however rarely applied to date. For example, material substitution or refurbishment of buildings brings risk of increasing emissions despite improving or avoiding current materials ( [[#Castro--2019|Castro and Pasanen 2019]] ; [[#Eberhardt--2019|Eberhardt et al. 2019]] ). Besides, CE concepts that extend the lifetime of products and increase the fraction of recycling are useful but are both thermodynamically limited and will remain relatively small in scale as long as demand for primary materials continues to grow, and scale effects dominate. In spite of presenting a large body of literature on CE in general, only a small but growing body of literature exists on the net effects of its strategies from a quantitative perspective, with key knowledge gaps remaining on specific CE strategies. There is ''medium evidence'' that the CE can reduce overall emissions, energy use, and activity levels, with ''medium evidence'' that the sharing economy can reduce overall emissions, energy use, and activity levels, with ''medium agreement'' on the scale of potential savings.

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